More debate needed on command and control

Much of the debate on climate policy has been around whether a carbon tax or a cap-and-trade scheme is a better way to achieve efficient emission reductions.

This is interesting and useful (well, tax-versus-cap-and-trade might be getting a bit stale lately) but what is missing from the debate is how command and control polices will support and complement trading. Command and control might offend economists, but, being pragmatic, it will be core to achieving 60%, 80% or 90% by 2050.

The California Air Resources Board believes that:

carbon trading is only going to produce about 40% of the reductions the state needs. The other 60% will be produced by old-fashioned sector-specific regulations.

Duke Energy, an American generator, has just signed a deal to build 16MW of photovoltaic solar panels in response to a state law requiring utilities to generate a rising proportion of their electricity from renewables. It seems unlikely that any market-based intervention could get things done so quickly.

The EU’s target of 20% renewable energy generation by 2020 shows that the EU does not believe carbon pricing alone will deliver the right type of investment in clean technology. The target needs to be supported by detailed national plans.

Command and control is expensive. There needs to be a lot more debate on how it can be outcome focused (i.e. designed to reduce emissions), politically acceptable and as efficient as possible.

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